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International Conference on Computational Science and Its Applications

ICCSA 2006: Computational Science and Its Applications - ICCSA 2006 pp 918–927Cite as

A Generalized Fuzzy Optimization Framework for R&D Project Selection Using Real Options Valuation

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Part of the book series: Lecture Notes in Computer Science ((LNTCS,volume 3982))

Abstract

Global marketplace and intense competition in the business environment lead organizations to focus on selecting the best R&D project portfolio among available projects using their scarce resources in the most effective manner. This happens to be a sine qua non for high technology firms to sharpen their competitive advantage and realize long-term survival with sustainable growth. To accomplish that, firms should take into account both the uncertainty inherent in R&D using appropriate valuation techniques accounting for flexibility in making investment decisions and all possible interactions between the candidate projects within an optimization framework. This paper provides a fuzzy optimization model for dealing with the complexities and uncertainties regarding the construction of an R&D project portfolio. Real options analysis, which accounts for managerial flexibility, is employed to correct the deficiency of traditional discounted cash flow valuation that excludes any form of flexibility. An example is provided to illustrate the proposed decision approach.

This research has been financially supported by Galatasaray University Research Fund.

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Author information

Authors and Affiliations

  1. Industrial Engineering Department, Galatasaray University, Ortaköy, Istanbul, 80840, Turkey

    E. Ertugrul Karsak

Authors
  1. E. Ertugrul Karsak
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Editor information

Editors and Affiliations

  1. Department of Computer Science, University of Calgary, 2500 University Drive N.W., T2N 1N4, Calgary, AB, Canada

    Marina Gavrilova

  2. Department of Mathematics and Computer Science, University of Perugia, via Vanvitelli, 1, I-06123, Perugia, Italy

    Osvaldo Gervasi

  3. William Norris Professor, Head of the Computer Science and Engineering Department, University of Minnesota, USA

    Vipin Kumar

  4. OptimaNumerics Ltd., Cathedral House, 23-31 Waring Street, BT1 2DX, Belfast, UK

    C. J. Kenneth Tan

  5. Clayton School of IT, Monash University, 3800, Clayton, Australia

    David Taniar

  6. Department of Chemistry, University of Perugia, Via Elce di Sotto, 8, I-06123, Perugia, Italy

    Antonio Laganá

  7. School of Computing, Soongsil University, Seoul, Korea

    Youngsong Mun

  8. School of Information and Communication Engineering, Sungkyunkwan University, Korea

    Hyunseung Choo

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© 2006 Springer-Verlag Berlin Heidelberg

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Karsak, E.E. (2006). A Generalized Fuzzy Optimization Framework for R&D Project Selection Using Real Options Valuation. In: Gavrilova, M., et al. Computational Science and Its Applications - ICCSA 2006. ICCSA 2006. Lecture Notes in Computer Science, vol 3982. Springer, Berlin, Heidelberg. https://doi.org/10.1007/11751595_96

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  • DOI: https://doi.org/10.1007/11751595_96

  • Publisher Name: Springer, Berlin, Heidelberg

  • Print ISBN: 978-3-540-34075-1

  • Online ISBN: 978-3-540-34076-8

  • eBook Packages: Computer ScienceComputer Science (R0)

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